SRINAGAR: Jammu and Kashmir Bank, the only private sector bank designated as RBI’s agent for banking business has tied up with Infrastructure Leasing & Financial Services Limited (IL&FS) to finance hydropower projects in J&K, sources said. A formal meeting between the two institutions took place in Mumbai on Wednesday.

Dr Haseeb Drabu

A senior executive of the Bank said there are nine hydropower projects with a total capacity of around 2,000 megawatts (MW), which need financing to the tune of almost Rs 20,000 crore. The two institutions will collaborate to manage this business utilising the capacities they have.

“We are proposing to conceive a joint venture between J&K Bank and IL&FS Financial Services, which will undertake the responsibility of supporting the implementation of some of the identified hydel projects in J&K,” IL&FS Financial Services managing director and chief executive Ramesh C Bawa has told the Mint newspaper.

The coming together of the two institutions is expected to strengthen the process of financing for power projects in the state of J&K.

The tie up which is yet to get the name may become the first Special Purpose Vehicle (SPV) given the approval from RBI, the regulating authority.

Parvez Ahmed, J&K Bank Chairman and CEO

While talking about the development, J&K’s Finance Minister Dr Haseeb A Drabu, who was part of the meeting, said that J&K has around 20,000 MW of unexploited power and a partnership like this could perhaps create a situation whereby J&K starts exporting power.

“J&K Bank has access to a certain domain and IL&FS brings in the skills of financing. If you combine the two, it will resolve a major problem for us in terms of financing of power projects. After you approve a power project it takes a year-to-year-and-a-half to get financial closure. We thought that if we could get going a certain structure whereby you could close it on day one and then given IL&FS’s own competence in down-selling the debt, we could actually speed up the whole process of putting in place a project,” Dr Drabu was quoted by the Mint saying.

“We are already into the power sector and we will continue financing the hydropower,” J&K Bank Chairman and CEO Parvez Ahmad said. “There is a huge potential for harvesting hydro-power in the state.”

Having sanctioned loan amount of Rs 1603 crore to the power sector, J&K Bank as of now has credit off take of Rs 673 crore, giving it room of Rs 1000 crore to invest. The new projects will add up to the order.

Understanding the needs of the sector at the user level, J&K Bank is only authorised banker for revenue collection of power sector and also carries out the banking business of the central government, besides collecting central taxes for Central Board of Direct Taxes (CBDT).

Ramesh C Bawa (ILFS)

Terming it as an important initiative which can turn things for good in power sector, Dr Drabu has said that J&K is looking at various such partnerships to make the state more relevant in the Indian financial services sector.
“One of the reasons why we want to do this partnership is because we want to get J&K on the map of financial services. J&K Bank has played a stellar role in this but I think we need to get into relationships that actually bring us into the centre of the financial services sector in the country,” Mint quotes Drabu saying.

“The larger effort is to create a sub-national financial architecture, because in the new emerging federal India, states will need to have their own financial architecture. We are trying to redesign the state finance corporation (SFC). In the new regime all SFCs have gone defunct. We have already made an open offer, bought out SIDBI (Small Industries and Development Bank) and others and now we are looking at a partner who can take 49% and we can revive that,” he added.

Given the expertise of J&K Bank and the exposure of IL&FS, sources in the bank said this would turn around the power scenario in the state by putting development of the hydropower projects on fast track mode and develop power transmission and distribution network of the state.

The joint venture, sources said is to be on the basis 50:50 which would be initially for the period of three years. Il&FS is India’s leading infrastructure development and finance companies and has an objective of developing projects on commercial basis.

Off late, there is massive emphasis on the hydropower sector in the state. More than Rs 30,000 crore is the capital for power sector in the Prime Minister Special Package to the state.

J&K government has faced a serious crisis in managing the financial closure while implementing 450-MW Baglihar stage-! It was delayed because of the crisis. Though the Stage-II was quick and fast, the government seems to have taken its lesson seriously.

LEAVE A REPLY

Please enter your comment!
Please enter your name here